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Marc Courtenay
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Marc is the founder and owner of Advanced Investor Technologies, LLC, as well as the publisher and editor at the internationally acclaimed web site www.ChecktheMarkets.com. He holds an MS in Clinical Psychology from California Polytechnic State University, and is a former senior vice-president... More
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  • How Realistic Are We Investors? 3 comments
    Jul 25, 2010 7:30 PM

     Treasury Secretary Geithner said today that U.S. companies scarred by the financial crisis remain “very cautious” and are trying to get more productivity from current employees before hiring new ones.

    Job growth is “not as fast as we need,” Geithner said in an interview broadcast today on NBC’s “Meet the Press” program. Employers “are still cautious, still very cautious,” he said. “So they’ve been trying to get as much productivity out of their employees as possible.”

    Earlier this week Fed Chairman Bernanke made the comment that the economic conditions in the U.S. are "unusually uncertain". Can we take a hint? Are pigs usually pink.

    We've had a great, short-term move in stocks, and it's hard to see the light at the end of the tunnel on all this. But it just might be a "freight train", or from a bearish perspective, a "fright train".

    My instincts and my proprietary "market observation analytics" tell me that we aren't too far from an abrupt shift in market direction and in investor sentiment. Market psychology isn't at important as most people think, but the fact that many small investors are not participating at all in these market surges and plunges, is quite telling.

    It is time to be in a state of heightened awareness about the media's "hints", the comments that powerful officials are making, and the track record of the stock market since the "flash crash" of May 6th.

    Realism beats optimism and pessimism every time.



    Disclosure: no stocks were mentioned
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Comments (3)
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  • Marc,
    Good points about the "hints". But given that da boyz being the prop desks, HFT'ers, algo traders, etc. dominate 70-80% of daily market trading volumes now, the small investor really makes no difference to the equity markets.

     

    Most small investors have consistently been moving out of equities and into bonds for virtually 15 months now. As evidenced by about the 20:1 flow into bonds from equity funds. With some minor flow into international equities. Yet this has had almost no impact on the market direction so far.

     

    What might make a difference is some of the following:
    1) Margin calls - forced liquidations with falling prices, might force even more selling and create a downward spiral. Rumor has it that John Paulson is more or less in this position now and is being forced to liquidate some holdings because of withdrawls, falling prices, etc.
    2) Shift by big traders - if and when the big traders (GS, JPM, HFT'ers, etc.) figure out that they can make a lot more money driving the market down, they will. They will establish large short positions and move the market down quickly and very substantially.
    3) Bond defaults - if and when, sovereigns begin defaults or restructures, then panic may well spread and widespread sell-offs of most asset classes may well happen.
    4) Macro data continues to worsen - if US and world macro data, continues to decline and a new recession is announced, then it may provoke panicky selling and a rush to exit risky assets.
    5) Oil spikes - oil goes over perhaps $100/barrel and causes significant US consumer spending cutbacks.
    6) 2011 proposed capital market tax increases - possibly large institutional and wealthy investor selling in late 2010 to lock in gains and get out before tax increases.

     

    And probably some others you could think of as well. Don't know what the catalyst might or will be, but it seems pretty unlikely to be anything associated with the retail investor.

     

    Any thoughts or comments on the above. Thanks.
    25 Jul 2010, 09:16 PM Reply Like
  • Author’s reply » All valid points, and I want to thank you for sharing them. To add to the list, I'm seeing more evidence that the Fed and the US Treasury is intervening and participating in the equity and bond markets. In fact, it is actually "common knowledge". I suspect the Fed uses some of the less conspicuous "market-makers" and "specialists" to go in and out of the markets at will in order to orchestrate the outcomes and market directions they dictate. That also would dominate and manipulate market sentiment, investor sentiment and perhaps lead to some of the political outcomes "da boyz" want. In this environment ( the post Aug. 2007 financial world) all bets are off and all things are possible, especially activities and "programs" that work "their" agenda and enrich the most powerful and wealthiest participants. There are built in "control mechanisms" that are so stealth and carefully concealed that it would shock the general public ( if that is still possible) if they knew the details. Anyway, I appreciate your realism "untrusting investor" and I'd like to stay in touch with you. Two heads are better than one in this game, that's for sure. My contact info is current, and all you have to do is click on "send message" on this page or my "profile" page. Thanks again for sharing your insights and comments
    26 Jul 2010, 11:40 AM Reply Like
  • Marc,
    OK, thanks for the reply and comments. Would agree with your reply. It has been pretty obvious that the PPT has very likely been the intervening force and big money behind much of the market support since at least mid 2009. All sell-offs were turned back in quick order. Think I counted at least 20% "stick save" days in the latter half of 2009 whereby sell-offs were turned into market rises in the last hour of trading. Not to mention Zero Hedge's numerours articles showing large pre & post futures and options activities to prevent sell-offs. Pretty amazing performance by the PPT, but then when one has unlimited money and power, guess it should not be surprising that almost anything can be done.

     

    Near as we can tell for limited reseach, the PPT has been around since about the late 1990's. It would appear that they have not intervened all that much and not very consistently until 2009. But the 2009/10 period appears to be the grandaddy of all with massive intervention and lots of consistency.

     

    Guess that is the real wildcard in the markets. Just no way to tell how much longer they are prepared to intervene. It would appear that they are prepared to continue for as long as it takes this time, even if that is 2, 3, or 4 years. It appears that they are ready, willing and able to prevent any panic or extended heavy selling for "the good of the country" type rationale. Would guess that the prop desks, HFT'ers, algo traders, etc. are direct pipelined into this information and thus they have a pretty good idea how to move the markets for maximum profits for themselves.

     

    Thus it may well take some "catastrophic type" event to overwhelm this artifical support. It would really have to spook the very big holders like pension funds, endowments, hedge funds, etc and make them want to exit at almost any cost. Only very large scale selling can overwhelm the massive support the PPT is providing. Once it starts, then the other factors we discussed probably would add to the downward pressure.

     

    In any event a mighty dangerous market these days for us small time investors. Just not any very good ways to go without taking on a great deal of risk in our view.
    26 Jul 2010, 12:47 PM Reply Like
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